TY - JOUR
AU - Town,Robert
AU - Wholey,Douglas
AU - Feldman,Roger
AU - Burns,Lawton R.
TI - The Welfare Consequences of Hospital Mergers
JF - National Bureau of Economic Research Working Paper Series
VL - No. 12244
PY - 2006
Y2 - May 2006
DO - 10.3386/w12244
UR - http://www.nber.org/papers/w12244
L1 - http://www.nber.org/papers/w12244.pdf
N1 - Author contact info:
Robert Town
Health Care Management Department
The Wharton School
University of Pennsylvania
3641 Locust Walk
Philadelphia, PA 19104
E-Mail: rtown@wharton.upenn.edu
Douglas Wholey
Health Services Research and Policy
School of Public Health
University of Minnesota
Mayo Mail Code 729,
420 Delaware Street S.E.
Minneapolis, MN 55455-0392
E-Mail: whole001@umn.edu
Roger Feldman
Health Policy and Management
School of Public Health
University of Minnesota
Mayo Mail Code 729
420 Delware Street S.E.
Minneapolis, MN 55455-0392
E-Mail: feldm002@umn.edu
Lawton Burns
Health Care Systems Department
The Wharton School
University of Pennsylvania
203 Colonial Penn Center
641 Locust Walk
Philadelphia, PA 19104-6218
E-Mail: burnsl@wharton.upenn.edu
AB - In the 1990s the US hospital industry consolidated. This paper estimates the impact of the wave of hospital mergers on welfare focusing on the impact on consumer surplus for the under-65 population. For the purposes of quantifying the price impact of consolidations, hospitals are modeled as an input to the production of health insurance for the under-65 population. The estimates indicate that the aggregate magnitude of the impact of hospital mergers is modest but not trivial. In 2001, average HMO premiums are estimated to be 3.2% higher than they would have been absent any hospital merger activity during the 1990s. In 2003, we estimate that because of hospital mergers private insurance rolls declined by approximately .3 percentage points or approximately 695,000 lives with the vast majority of those who lost private insurance joining the ranks of the uninsured. Our estimates imply that hospital mergers resulted in a cumulative consumer surplus loss of over $42.2 billion between 1990 and 2001. It is estimated that all but a modest $95.4 million of the loss in consumer surplus is transferred from consumers to providers.
ER -